Q1 2025 Caesarstone Ltd Earnings Call
Speaker Change: Greetings, and welcome to the Caesarstone First Quarter 2025 earnings conference call.
Speaker Change: At this time, all participants are in a listen-only mode. A brief question in the answer session will follow the formal presentation. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.
Speaker Change: Thank you, operator, and good morning to everyone on the line. I am joined by Yosef Shiran, Caesarstone's Chief Executive Officer, and Nahum Trost, Caesarstone's Chief Financial Officer.
Speaker Change: Certain statements in today's conference call and responses to various questions may constitute for looking statements.
Speaker Change: We caution you that such statements reflect only the company's current expectations and that actual events or results may differ materially.
Speaker Change: For more information, please refer to the risk factors contained in the company's most recent annual report on Form 20s and subsequent filings with the SEC.
Speaker Change: The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's first quarter 2025 earnings release which is posted on the company's investor relations website.
Speaker Change: On today's call, Yosef will discuss our business activity and Nahum will then cover additional details regarding financial results before we open the call for questions.
Speaker Change: Thank you and I would now like to turn the call over to you. Please go ahead.
Yosef Shiran: Thank you, Brad, and good morning everyone. Thank you for joining us to discuss our first quarter 2020-25 results.
Our first quote to performance demonstrates continued stabilization in our business.
of our strategic direction.
Yosef Shiran: Our transformation is fundamentally reshaping our operations. We have created operational flexibility by shifting more than 70% of our production to our global manufacturing
Yosef Shiran: This allows us to adapt quickly to market fluctuations and then has been instrumental in maintaining resilient cross margins and amidst revenue headbands.
Yosef Shiran: Our ongoing investments in porcelain, reinforced our confidence in its future growth as a strategic
Yosef Shiran: Having exercised our call-option, we expect to complete the Loyoli-Sarmica Minority Acquisition Disquater. Full ownership will empower us to drive innovation and capture new opportunities across our personal portfolio.
Yosef Shiran: In Australia we have made significant progress with our zero crystalline silica products. The majority of these products are already available in the market with additional offerings on track to launch in the coming month.
Yosef Shiran: This comprehensive collection not only ensures compliance with regulatory requirements but strengthens our competitive positioning in this important market.
Yosef Shiran: The recently announced US Starry for imports presents a new challenge that we are actively
Yosef Shiran: Despite these challenges, our balance sheet is strong with a net cash position of $85.3 million.
Yosef Shiran: This provides us with a significant financial flexibility to navigate the current environment while continuing to invest in our business priorities.
Yosef Shiran: Our pivot from an industrial-oriented organization to one centered on R&D marketing and brand development continues to progress as planned.
Yosef Shiran: The structural improvements we are making to our business model are designed to strengthen our competitive position and enable us to achieve higher levels of profitability when market dynamics improve.
Yosef Shiran: and now turn the call over to Nahum to review our financial results in more detail.
Thank you, Yosef, and good morning, everyone.
Look in at our first quarter results.
Yosef Shiran: Global Revenue was $99.6 million compared to $119.3 million in the prior year quarter.
Yosef Shiran: On a constant currency basis, first quarter revenue was down 14.5% year-over-year due to lower volumes across our main regions resulting from continued global economic headwinds.
affecting activity across all channels in addition to competitive pressures.
Yosef Shiran: by merely reflecting softer market conditions in the residential channel, including the business
We also saw softness in the commercial segment.
Yosef Shiran: Our Big Box Business performed relatively better compared to the prior year quarter.
Canada sales were down 11.5% on a constant currency basis.
Yosef Shiran: Driven by lower cells in our core business, partially offset by solid growth in our large retail channel.
Yosef Shiran: Australia's sales were off by approximately 28.2% on a constant currency basis, mainly reflecting the market on certainty.
Yosef Shiran: Following the governmental ban on silica based engineers on products and slower market conditions due to high interest rate and fewer new home completions.
Yosef Shiran: Our EMEA region was a bright spot with an increase of 16.4% on a constant currency basis.
Yosef Shiran: We saw growth in Emir, Distributor Channel, reflecting improved market conditions and favorable timing of orders.
Yosef Shiran: In Israel, sales increased by 13.2% on a constant currency basis in line with our expectations given improving market conditions as the impact of the war on terror begins to normalize.
Looking at our first quarter PNL performance.
Yosef Shiran: What smudging in the first quarter was 21.3% compared to 24.5% in the prior year quarter?
Yosef Shiran: The decrease in growth margin was mainly due to lower fixed cost absorption due to reduced volumes and unfavorable product mix.
Yosef Shiran: These factors were partially offset by the ongoing benefits of our improved production
Yosef Shiran: Andrew, just exposure to high cost inventory, following the Richmond Hill client closure, along with the realization of further savings from our restructuring actions.
Yosef Shiran: Operating expenses in the first quarter were $35.9 million or $36.1% of revenue compared to $34.6 million or $29.2% of revenue in the prior year quarter.
Yosef Shiran: Excluding legal settlements and lost contingencies operating expenses were $32.5 million or $32.6% of revenue compared to $33.9 million or $28.6% in the prior year quarter.
Yosef Shiran: The Justice DVD during the first quarter was a loss of $7.1 million, compared to a gain of $0.6 million in the prior quarter.
Yosef Shiran: The Euroverear Reduction Injusted Evidence, Primarily Reflects, Lower Revenues and Gross Marge The Euroverear Reduction Injusted Ev
Yosef Shiran: I just said the eluded net-close per share for the first quarter was 29 cents on 34.6 million shares, compared to adjusted the eluded net-close per share of 13 cents in the prior year quarter on a similar share count.
Yosef Shiran: Turning to our cash flow and balance sheet, we ended the quota with the solid financial position.
Yosef Shiran: As of March 31st, 2025, our balance sheet included total cash of $88.8 million and total debt to financial institutions was $3.5 million.
Yosef Shiran: We have made significant progress in sublisting the majority of available land and building that our DOTA and facility, which we expect will generate cash savings of approximately $3 million during 2025.
Yosef Shiran: We use cash for operating activities in the amount of $15.1 million during the first quarter, primarily reflecting seasonal working capital patterns and some inventory bill.
Yosef Shiran: Despite this usage, our overall balance sheet trend provides us with significant financial flexibility to continue executing our strategic initiatives.
Yosef Shiran: Before turning to our outlook, I'd like to comment on few matters.
Yosef Shiran: Regarding the U.S. tariffs announced in April , we are actively assessing the potential impact.
Yosef Shiran: The 10% are for imported goods, for multiple countries including Israel affects our US business which represents approximately half of our total revenues.
Yosef Shiran: As of March 31st, 2025, we were subject to lawsuit involving 357 injured persons alleging injuries associated with exposure to the spiritual crystalline silica dust.
Yosef Shiran: These cases are spread across Israel of Australia and the United States.
Yosef Shiran: We have recorded a provision of $50 million representing our assessment of the probable and estimable exposure with insurance receivable for silicosis-related claims totaling to $31.6 million.
Yosef Shiran: The $50 million provision also includes the provision for two U.S. cases, for which loss is available in a system available under U.S.
Yosef Shiran: We estimate the loss for 18 of the remaining 174 US cases is only reasonably possible with the range between half a million dollars to 13 million dollars per plane.
Yosef Shiran: The other claims are at an early stage in which the amount of the possible loss cannot be reasonably estimated at this time, given the preliminary stages complexity of the claims and the uncertainty as to our liability and the scope of insurance coverage.
Now turning to our Outlook for 2025.
Yosef Shiran: Given the persistent macroeconomic pressures across our global footprint and the recent clean post U.S. stories, we are withdrawing our fuller outlook as we assess the potential direct and indirect impact on our results.
Yosef Shiran: Even so, we remain focused on disciplined execution of our transformation and we have a fortified balance sheet
Yosef Shiran: We are on track to realize the full benefits of our cost optimization initiatives of approximately ten million dollars in incremental sevens in 2025 compared to the full year of 2024.
Yosef Shiran: V-saving reflect the successful execution of our plant closures and manufacturing optimization.
In clothing?
Yosef Shiran: Despite the headwinds we face, we remain confident in our ability to execute our transformation.
Yosef Shiran: The implementation of our strategy has positioned us well to manage near-term headwinds while preparing for improved performance as market conditions normalize.
Yosef Shiran: With that, we are now ready to open the call for questions.
Yosef Shiran: Now I'll begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you were using a speaker phone.
Please pick up your handset before pressing the keys.
If at any time your question has been in
Yosef Shiran: Drost, and you would like to withdraw your rest. Please press star then too.
Yosef Shiran: At this time, we will pause momentarily to assemble our roster.
Reuben Garner: Our first question comes from Reuben Garner with Benchmark. Please go ahead.
Thank you. Good evening, guys.
Good morning. Good morning.
So I get to start a nice
Speaker Change: A nice sequential improvement in margins from Q4 to Q1 on a similar top line, can you walk through?
Speaker Change: It looks like maybe almost a couple on her basis points on the gross margin side of improvement. How much of that was some of your savings flowing through and what other factors maybe led to the improvement?
Speaker Change: Hi Ruben, this is Nahum. Yeah, so we saw, as you said, we saw some improvement in the gross margin. Some of it relates to the modest increase also in terms of revenue.
Speaker Change: You know, some of it we are already benefiting from some of it in Q1 so those are the main
Speaker Change: The main things that help to improve the growth margin from Q4.
Speaker Change: Compared to Q1, there is a decline, some of it relates to the lower volume.
Speaker Change: Also, the ethics had a relatively significant negative impact on us as the US dollar got stronger against the Australian dollar and the Canadian dollar.
Speaker Change: But on the other side, again, we are benefiting from the actions that we already took under our touching plan.
Got it. Sorry, I was on mute.
Speaker Change: Okay, and then the top line in the first quarter, I think if we go back a few months ago we would have thought that that was going to be kind of a low number, seasonally low number for the year. Do you still expect?
Speaker Change: That revenue will move higher as the year persists or has enough changed from your perspective with the macro to kind of...
Put that into doubt now.
Speaker Change: So, 2025 started with the same market dynamics, basically we still see weak macroeconomic
So…
Speaker Change: Historically, Q1 is the lowest, so we do expect to see some interest based on the historical seasonality in which the second and third quota are usually higher than Q1.
Speaker Change: and also based on the actions that we are taking, you know, we expect to see...
Dratual increase as we progress through the year.
Speaker Change: Okay, a question on tariffs. I know it's difficult to predict where things will land, but roughly have to your businesses in the U.S.
Speaker Change: I think all of that product comes from outside of the U.S. now.
would
Speaker Change: Would these tariffs, do they change, I mean, is it possible you reopen the facility in the U.S.? How do you think about that ten points?
Speaker Change: of incremental cost, and I guess can you talk about your competition, like do you believe that most of the product from your peers are also coming from outside of the U.S. and
Speaker Change: Hiroben Chios, so we think that most of the competition suffers from the same dynamics. Today, almost everybody outside of the US.
Speaker Change: Pay the tariff of 10% until July , as of July and on, we don't know as of yet.
There are some producers in the United States.
Speaker Change: But the vast majority of the products are coming outside of the states.
Speaker Change: So, we don't see a huge change in the near future because the competition probably will stay the same.
Um, and they...
Speaker Change: Over the horizon of these three months, it's difficult to predict.
Speaker Change: by working closely with our business partners on the prices, on one hand and on the other hand we are considering raising the prices in the United States.
and a little bit to accommodate this.
Speaker Change: Okay, and then how about China? I know you've increased your exposure there, but how much of that product that you're getting from Chinese manufacturing facilities is coming to the U.S. at the moment.
Speaker Change: We operate from different countries. In general, we took into consideration that some tariff in general, some tariff may be tariff fluctuations may occur.
Speaker Change: So we are quite diversified in the countries with producing China but it goes mainly to other areas in the world
Speaker Change: We don't sell and we don't produce in China for the States so there is no impact on the sales for the United States with what's happening in China.
Speaker Change: Okay, and then the last question for me is on the lawsuits, and I know this can be difficult to answer, but I just want to make sure I understand clearly what we know today. So basically, you're recording a provision of $50 million.
Speaker Change: That's for the claims that have already been settled or are close to being settled.
Speaker Change: and that's roughly half of the claims and so there's the other half of the claims remaining that is to the remaining risk outside of the 50 million in the 31.6 insurance provision is that the right way to think about it.
The probable exposure relates to the claims that are outstanding.
In Israel, in Australia, and also in power out.
for the U.S.
Speaker Change: In the US currently we have around 176 claims that are outstanding, out of those 176 claims only two claims reflect a loss that is probable and can be estimated so it is.
Included in the 50 million, all the other 174 claims.
Speaker Change: are either only reasonably possible, 18 claims of those 174 are only reasonably possible for the laws.
Speaker Change: but this loss is not part of the 50 and the majority of the 174 other than the 18 that I just mentioned are at an early stage in which you know given the preliminary stage
Speaker Change: The complexity of this issue and also the uncertainty around the insurance cover currently the loss
He did not be estimated.
Yosef Shiran
Speaker Change: In addition to the 50 million keep in mind that we have also insurance receivable.
Speaker Change: to receive from the insurance carrier that, you know, that covered this issue in the amount of $31 million, also booked as of March 31st, 2025.
Speaker Change: Okay, and just sorry to harp on this but I just want to try to be clear as possible so combine that 81 point
Cases that have already been that the hundred and-
Speaker Change: 80 roughly cases that have already been moved far enough along and those would not touch the 174 in the U.S. is that the right way to think about it?
Speaker Change: No, the liability that covers the probable loss is 50 million against it. There is an answer to
Speaker Change: On the other side, it's a receivable, not a liability, a receivable from an insurance company of $31 million. So the net exposure of all the claims, again, in Israel, in Australia, and those that are probable in the U.S., the net exposure is only $19 million on the book. Perfect.
Speaker Change: Okay. Awesome. Thank you guys very much for the detail. I wish you luck and I'll talk to you later today.
Thank you.
Thank you Reuben, thanks a lot.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Yosef Shiran for any closing remarks.
Yosef Shiran: Thank you for your attention this morning and we look forward to updating you on our progress next
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Reuben Garner, Caesarstone Ltd
[music]
Speaker Change: I'm a Christian. I love you. I'm a Christian. I love you. I'm a Christian.
Speaker Change: Reuben Garner, Andrew Maser, Brad Cray, Nahum Trost
Yosef Shiran: I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Reuben Garner, Andrew Maser, Brad Cray
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Yosef Shiran: P.S. If you're reading this, you're going to be a good man. See you later. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.
Yosef Shiran: A film by Yosef Shiran A film by Yosef Shiran A film by Yosef Shiran
Speaker Change: In 1992, Prince Edward, 31, was released from prison. The debut story of a new personal story King George III, known as Nick Jordan, was sentenced to death within a week, and at the hand of Diana Ross, the widow of a mientras severe father
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Reuben Garner, Caesarstone Ltd.
Yosef Shiran: Dr. Cray, Nahum Trost, Yosef Shiran
[music]
Reuben Garner, Cray, Nahum Trost
Reuben Garner, Caesarstone Ltd
Reuben Garner, Andrew Maser, Brad Cray
Yosef Shiran: [music].
Yosef Shiran: Yeah.
Yosef Shiran: Yeah.
Yosef Shiran: Yeah.
Yosef Shiran: [music].
Yosef Shiran: Okay.
Yosef Shiran: [music].
Yosef Shiran: [music].
Yosef Shiran: [music].